1. An Indian company can borrow at 3% in Euros, 4% in US dollars and 9% in Indian rupees. The CFO of the company argues that the company should borrow in Euros because it is the cheapest debt. Is that true? Why and why not? (4 points)

2. Dividend changes can operate as signals to the market. Is an increase in dividends always a positive signal? Explain why and why not. (3 points)

3. Classify the following actions into value changing and value neutral actions. If value changing, specify whether it will increase or decrease the intrinsic value of equity in a business. (3 points)

a. A stock dividend

b. Impairment of goodwill from a past acquisition (not tax deductible)

c. A non-cash restructuring charge (not tax deductible)

d. Impairment of goodwill from a past acquisition (a portion is tax deductible)

e. A non-cash restructuring charge (tax deductible)

f. A corporate name change with no change in business focus

g. A corporate name change with a change in business focus